Rental income on property?

barriei

Hi, I would be grateful if anyone can help with my query. I wrote to the tax office but they weren't too helpful and did't answer my question.....

My brother and I bought a property together which he now lives in with his wife. It is only mine and his names on the deeds and on the mortgage.

I still live with my parents. Is there any income tax to pay on this? Any help would be appreciated.

Thanks

dunstonh

Yes. The property is not your primary residence and therefore the rental income is potentially liable to income tax.

MarkyMarkD

You are assuming that there is some rental income, dunstonh. I don't believe that we were told this!

If you co-own a property and the other co-owner lives in it, free of charge, then there's no tax liability at all.

If the other co-owner pays your share of the mortgage repayments, as well as their own share, then there is potentially a tax liability but only if the amount they pay (which you should) exceeds the total of the mortgage interest and any other property-related expenses which you also meet.

dunstonh

You are assuming that there is some rental income, dunstonh. I don't believe that we were told this!

True. However, I made that assumption on the basis that there was income. Otherwise why ask about income tax?

barriei

Thanks for your help so far. My bro pays the money from his own account into a joint account held between me and him. He just pays in the amount to cover the mortgage and the lender takes the money from this account.

His payment will exceed the mortgage interest as it is a repayment mortgage. Im pretty sure then that I have to pay tax then. Am I correct?

Thanks

talkinpeace

OP
Two of you buy a flat.
The one living in it pays more towards the upkeep - cos they are doing the wear and tear.
They do not pay the money to you, just to a house account.
Repairs to the property are paid out of that account.
No income tax implications.

When you come to sell, his half will have no tax liability - cos he lived there.
Your half will be CGT liable.
Until then, chill out.

barriei

ok. 2 different viewpoints so far. Anyone know which one is right? Thanks

dunstonh

Can you clarify if you are earning an income from it or not?

barriei

Like I said he pays the whole of the monthly mortgage payment into a joint account held between me and him and it goes straight out to the lender. He just pays the mortgage amount - no more. Im not sure if this is classed as me receiving income??

barriei

originally we bought the property to renovate and then rent out so we put in 50/50. Then when he decided to get married we decided he could live there if he wanted. So we do both actually own the property jointly rather than just using my name for my credit history etc. I realise I will have to pay CGT if we sell but its this income tax bit that Im unsure of.

jimmo

I really don’t think you need to worry about Income Tax. Even if you owned the entire property and let your brother live there rent free you would have no Income Tax to pay. i.e. no income, no tax.
In the context of letting there is no such thing as a deemed income.
Capital Gains Tax is far more complicated but I think you are wrong to simply accept that you will be liable to CGT when you sell.
I hope you’re ready for this and if you can get your head around it, it could save you big time in the long run.
Please remember that I am making lots of assumptions here and in my days as a taxman I would rely on legal advice from solicitors regarding beneficial ownership and the District Valuer for valuations.
When you and your brother bought the property you probably bought as legal joint owners and became equal, half share, beneficial owners.
Assuming you shared all the costs before your brother moved in you probably continued to be half share, beneficial owners until he moved in.
On the day he moved in you disposed of, and he acquired, his right to occupy the property rent free.
If, at the same time, your brother took sole responsibility for the mortgage repayments and all the other household bills then what you disposed of was something different.
Really struggling to put this into plain English but what I am trying to say is that the beneficial ownership of the property is probably mostly your brother’s.
When the property is sold there will certainly be a Capital Gain but most of it should be attributable to your brother, not you. He can claim main residence relief, you can’t.
It will probably cost a lot of money to get good professional advice but it really should be worth it.